How do innovations find their way to final consumers?

On 15 February 2008, TILEC held a seminar on innovators' access to the market. Lars Persson (Research Institute of Industrial Economics, Stockholm) reported about a model in which an innovator has to decide whether (s)he wants to sell (or license) its business idea to the incumbent firms, or venture into production and enter the final good market. The intuition according to which the entrepreneur will enter when his or her idea is really good is proved wrong: sales are more likely when the innovation is more drastic. Policies that aim at stimulating the entry of small entrepreneurs may be counterproductive, as they may then give innovators the incentive to develop products of lower value. Damien Geradin (TILEC) addressed the various legal and economic issues surrounding two forms of patent bundling. The first relates to the creation of patent portfolios, which are a helpful way to solve transaction costs and other inefficiencies when patents essential to a standard are held by many different firms. The second, which has been ignored so far in academic circles, relates to the situation where patent holders license bundles. Although those practices may generate efficiencies, they can also be problematic under current competition laws.